Finance or gambling? Prediction-market players push for regulatory clarity in Asia

Fintech industry executives have stepped up lobbying for clearer regulations regarding prediction markets as they attempt to distance the business from gambling and also play down its risks.

“There is so much uncertainty,” said Nicholas Baumer, chief commercial officer of the brokerage firm Tickmill, during a panel discussion. “Each market is figuring out what they are doing.”

Prediction markets, with Polymarket a notable American example, are financial exchanges where traders can predict the outcome of a wide range of real-world events, including geopolitics and sports, and gain or lose money based on their accuracy.

“For me, the answer is clear, that [prediction markets are] a financial product and not a gambling product,” said Gabriele Juodele, vice-president for strategy and growth at Plaee, a prediction market infrastructure platform.

She cited the US, where prediction markets “are fully regulated under the same financial derivatives regime as all other financial products”. Some US states, however, have placed restrictions on the platforms.

Prediction markets were not “inherently more risky than existing derivatives”, said Christopher Stiegeler, the panel moderator and executive director at EBC Financial Group, in an interview. But he emphasised that his firm worked within each jurisdiction’s regulatory framework.

Stiegeler said prediction markets would “make trading more accessible”, as they were “more real-world and less technically challenging” than other financial products.

The panellists agreed that clearer regulation in Asian jurisdictions would attract more institutional investors. It would create “trust” to enter the market, said Peter Iosif, senior market analyst at brokerage firm IronFX.

They also agreed that prediction markets could attract new demographics.

“Prediction markets trading is Gen-Z trading,” said Serhii Poplavskyi, head of Match-Trader Platform at Match-Trade Technologies, citing prediction markets’ relative simplicity.

“Regulation is great, but overregulating kills the business.”

Panellists cited public perception of prediction markets as a major challenge to the industry.

“Perception will be key in the next six to 12 months,” Baumer said. “If it is perceived as sports betting, Islamic countries might have an issue with it,” he added, mentioning Indonesia and Malaysia.

“I wouldn’t be surprised to see a regulatory crackdown,” Iosif said, adding that prediction markets could end up merging with traditional foreign-exchange markets.

“In five years, regulation will be established in Asia and all companies will have [prediction markets] as a product line,” Juodele said.

“Maybe countries with stricter regulations will re-evaluate” their stance on prediction markets, Poplavskyi said. That would allow “technology providers and brokers to expand” into Asian markets and “engage these audiences”, he added.

https://www.scmp.com/business/markets/article/3370249/finance-or-gambling-prediction-market-players-push-regulatory-clarity-asia